Storage Auctions

Resources => Donations & Taxes => Topic started by: Travis on December 29, 2013, 08:50:43 PM

Title: The Tax Man Cometh
Post by: Travis on December 29, 2013, 08:50:43 PM
As we approach the new year, I'm sure we all have our taxes in the back of our minds. Are you going to wait until last minute or get them done early? Do you do your own, hire a professional or use a service like TurboTax? Do you even bother filing taxes on the items you resell?
Title: Re: The Tax Man Cometh
Post by: alloro on December 29, 2013, 10:29:36 PM
I do my own and I always wait until April to file them. I wait for two reasons. One, software updates do come out with corrections that if affected my return would force me to have to file an amended return. Two, the people over at the IRS are so tired of processing returns come April that they seem to be less picky about the small things. Every single time I've ever filed early I've been questioned on something.
Title: Re: The Tax Man Cometh
Post by: Travis on December 30, 2013, 12:03:55 PM
the people over at the IRS are so tired of processing returns come April that they seem to be less picky about the small things.

I agree. I have filed my taxes at the deadline for several years. Never had a problem.

This year I should be getting money back so I'm filing January 1st. Probably use TurboTax again this year. It's pricey but it makes it so simple to find deductions.
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on December 30, 2013, 12:05:12 PM
I always file early as possible. I use TurboTax, but I don't know if I should do that this year because of the store. Lots of new variables involved with my taxes.
Title: Re: The Tax Man Cometh
Post by: blaknite on December 30, 2013, 09:56:17 PM
On the topic of taxes...  A month or so ago I dropped two trailer loads (6x10) full of thrift type stuff.  Donated the stuff to a church owned thrift store, and was given a blank tax write off form.  Guy signed it and told me to fill out what I was donating was worth myself.  Not sure if that is the norm or not, but it leaves me with a dilemma.  I have no idea what to put on it.  If I value the stuff too high I can see an audit coming, too low and money is left on the table.

What value would you put on it?  Was about 50% clothing, the other half made mostly up of things like picture frames, baskets, toys, craft supplies, quilts, etc.  (stuff I probably could have sold but would have taken forever to move...)
Title: Re: The Tax Man Cometh
Post by: Travis on December 30, 2013, 11:36:12 PM
My former accountant said that donation write-offs are red flags and increase your chances of being audited. Not sure if that's true or not.
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on December 31, 2013, 08:11:38 AM
My former accountant said that donation write-offs are red flags and increase your chances of being audited. Not sure if that's true or not.

I've put thousands each year into my taxes as donations. I've never been audited. I think it depends on the proportion of donation amount vs. income, if at all.

The IRS has a guide on how to value things. I'm sure you don't have an itemized list. I would put a value of $750 a load. $1500 total.

IRS values clothes higher than you would think. Something like $4/jeans, $3/polo shirt.. You can look up the values and better estimate your write off.
Title: Re: The Tax Man Cometh
Post by: dbr831 on December 31, 2013, 10:52:37 AM
On the topic of taxes...  A month or so ago I dropped two trailer loads (6x10) full of thrift type stuff.  Donated the stuff to a church owned thrift store, and was given a blank tax write off form.  Guy signed it and told me to fill out what I was donating was worth myself.  Not sure if that is the norm or not, but it leaves me with a dilemma.  I have no idea what to put on it.  If I value the stuff too high I can see an audit coming, too low and money is left on the table.

What value would you put on it?  Was about 50% clothing, the other half made mostly up of things like picture frames, baskets, toys, craft supplies, quilts, etc.  (stuff I probably could have sold but would have taken forever to move...)

I think you are limited to what you paid for the stuff in the first place. Obviously if you value it too high it will raise a flag. Say you are claiming $200 expense for storage units and $250 deduction for donated stuff....not ok.

And to Travis.....seriously?  Did you have to bring this up already. I Hate tax time! No fun! In past years I have used TurboTax and definitely recommend it. Worth every penny. Took over a large family business in 2012 (Not related to storage unit purchases) and was definitely in over my head so paid a professional to do my taxes last year and will do so again.
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on December 31, 2013, 11:28:57 AM
I think you are limited to what you paid for the stuff in the first place. Obviously if you value it too high it will raise a flag. Say you are claiming $200 expense for storage units and $250 deduction for donated stuff....not ok.

And to Travis.....seriously?  Did you have to bring this up already. I Hate tax time! No fun! In past years I have used TurboTax and definitely recommend it. Worth every penny. Took over a large family business in 2012 (Not related to storage unit purchases) and was definitely in over my head so paid a professional to do my taxes last year and will do so again.

Not quite. The IRS has no idea what you're donating. As an individual, you are limited to donating 50% of your AGI (Adjusted Gross Income). So if you say you donate $50,000 a year but only make $40,000 a year, you will only get credit for $20,000 a year AND you raise a red flag.

Many people spread out donations over multiple years. You have 5 years to claim a donation. So if you donate a vehicle, for example, you can claim it once in the next 5 calendar years, or with help of an accountant, you can spread that over the next 5 years if you choose.
Title: Re: The Tax Man Cometh
Post by: blaknite on December 31, 2013, 01:06:26 PM
I can't see how the value of a donation could be linked to the original cost of of a unit.  It would have to be the real value of the goods.  I paid 1900 + taxes and buyers fee for the unit the donation came out of.  My ledger says $2550 but that includes all costs, gas, storage space, helpers, etc.  The goods donated was two loads out of seven I got from the unit.  (10x25 hoarder's unit literally full from floor to ceiling front to back...)  While I could value it at 2/7ths of the total, that doesn't seem close to actual value.

I'd sooner throw the donation receipt in the trash than deal with an audit, but I know I made enough on the side this year that tax time is gonna really hurt if I don't claim everything I'm legally entitled to.
Title: Re: The Tax Man Cometh
Post by: Alias300 on December 31, 2013, 01:20:01 PM
My taxes are easy this year.   I'm done.  Just need to plug numbers into appropriate space.  My medical expenses and sales tax exceeded income so don't even need donation write offs.  Will save those for future years....

And yes, donations from lockers are limited to what you paid for the unit.   Which is messed up because if you pay $100 for a unit that has $1000 TV you donate, write off can only be $100.    But you pay $100 for a unit that has $100,000 cash in it....you pay income tax on $99,900 of it.

Tax laws changed again.  Any donations over $500 need to be itemized.  At least snap photos as you unload so you have proof......

Nice little program (they now have an app, too).  You can print it out for your taxes or if you use turbotax it will import it for you....

https://turbotax.intuit.com/personal-taxes/itsdeductible/
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on December 31, 2013, 02:31:40 PM
Where do you see that you can only write off the amount of the locker? I can't find that info.
Title: Re: The Tax Man Cometh
Post by: Alias300 on December 31, 2013, 02:34:17 PM
I'll have to search for it.  It buried in the donations section of the IRS website......
I'll try and find it and get back to ya.
Title: Re: The Tax Man Cometh
Post by: Alias300 on December 31, 2013, 02:44:44 PM
"If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction.

Your basis in property is generally what you paid for it. If you need more information about basis, see Publication 551."
........
Now this particular section is referring to items such as a painting.  You paid $500 but now worth $1000.....
But rules still apply.   

You can read up some in publication 526 but I've found elsewhere better definitions.....I'll track them down.

http://www.irs.gov/publications/p526/ar02.html#en_US_2013_publink1000229755

Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on December 31, 2013, 03:06:40 PM
That's only for appreciating valued items. Items like clothing, housewares, home decor do not appreciate in value so you can claim fair market value.. See the following..

"Special rules apply if you contribute:

Clothing or household items,

A car, boat, or airplane,

Taxidermy property,

Property subject to a debt,

A partial interest in property,

A fractional interest in tangible personal property,

A qualified conservation contribution,

A future interest in tangible personal property,

Inventory from your business, or

A patent or other intellectual property."

The following link is for tangible goods as outlined above..

http://www.irs.gov/publications/p526/ar02.html#en_US_2013_publink1000229745 (http://www.irs.gov/publications/p526/ar02.html#en_US_2013_publink1000229745)

Because I can donate my whole store as "inventory from your business" and write off every dime even though I got most of it through storage auctions.
Title: Re: The Tax Man Cometh
Post by: Alias300 on December 31, 2013, 03:23:59 PM
And you could only deduct what you paid for it.....not what you have it marked at even if you have it marked at FMV.   

Basically, let's say I find an item at value village mismarked for $1 but it's selling on ebay for $100.
I can only donate and deduct $1, not $100, because that's what I paid for it.
Same applies to storage units.

You'd need to talk to a tax attorney.  Since you own a shop and have already deducted the cost of the unit as a business expense it gets even more tricky.

Search the threads. We had it all broken down last tax season.

Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on January 01, 2014, 07:27:29 AM
I'll have to search out the advice of a tax attorney i guess.. What you're saying makes sense, but I don't know how something like that is traceable. If I buy a shirt on clearance for $2 and I wear it for 2 years, how can I possibly be expected to remember what I paid for it when I donate it?
Title: Re: The Tax Man Cometh
Post by: alloro on January 01, 2014, 02:06:10 PM
And you could only deduct what you paid for it.....not what you have it marked at even if you have it marked at FMV.

This is only correct for each item valued over $500. For items valued at $500 or less you do not need to declare your cost basis for that item. See form 8283, Part I: http://www.irs.gov/pub/irs-pdf/f8283.pdf

Also, as to not exceeding the cost of the storage unit. You actually can go all the way up to the cost of all units purchased during the year, as well as, all expenses incurred to makes those purchases. Technically, the buying of units is considered a business, and being such anything to do with the IRS is based on the gross yearly income and all expenses to create that income.
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 01, 2014, 02:40:52 PM
This is only correct for each item valued over $5,000. For items valued at $5,000 or less you do not need to declare your cost basis for that item. See form 8283, Part I: http://www.irs.gov/pub/irs-pdf/f8283.pdf

Also, as to not exceeding the cost of the storage unit. You actually can go all the way up to the cost of all units purchased during the year, as well as, all expenses incurred to makes those purchases. Technically, the buying of units is considered a business, and being such anything to do with the IRS is based on the gross yearly income and all expenses to create that income.

Have you read this form?

It's for exactly opposite of what your saying.......


For deductions over $500.
With a section to itemize.  Where you got, your cost, FMV........

............

Now the other part of your post is where I get confused on finding cost of items.
Yes, your correct.   Total cost (unit, gas, dump....) is taken from sales to get AGI.  But I'm not sure how to value items left based on costs.....
I've yet to find any direct formula on calculating this. 

I mean, think about my prior statement on donation can only be what you paid, not what FMV is.
But now, you go to sell business.  They will add up FMV and tax you on the sale....?   Really, the price of business should be calculated on what you paid, but it's not.    Tax law sucks.
Title: Re: The Tax Man Cometh
Post by: alloro on January 01, 2014, 02:50:17 PM
Have you read this form?
It's for exactly opposite of what your saying.......
For deductions over $500.

Yes I've read it, sorry for the extra zero. Where I put $5,000 I should've put $500. I'll correct the post.
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 01, 2014, 03:04:59 PM
Oh, okay.   So we are saying basically the same thing.   ;D


Why do we even get into this every year?!   It clear none of us understand tax law!    :D
Title: Re: The Tax Man Cometh
Post by: alloro on January 01, 2014, 05:33:09 PM
Why do we even get into this every year?!   It clear none of us understand tax law! 

We don't understand women, yet we still marry them. :D
Title: Re: The Tax Man Cometh
Post by: blaknite on January 02, 2014, 12:42:53 PM
So lets say I spent $20 on steel, wheels, spray paint, and welding rod.  I then manufactured a cart that I sell for $100.  Do this all day long as a business...  Now say I donate a cart to a homeless shelter. Can I expense the donation as $20 my cost of materials, or as $100 the value of goods?

When I buy a storage unit, I pay a flat rate for a box full of raw materials.  From that I clean / refurbish / dispose of trash, and do whatever I can to add value and generate sale-able product.  I should be able to value the goods at what I've made them worth.  Just one way of looking at it... 

You could also look at storage unit buying as gambling and put the numbers in as gambling loss / income.  (probably a stretch...)
Title: Re: The Tax Man Cometh
Post by: alloro on January 02, 2014, 01:53:29 PM
Now say I donate a cart to a homeless shelter. Can I expense the donation as $20 my cost of materials, or as $100 the value of goods?

You would value the donation at $100 since that is the fair market value of the item. Technically since you no longer have the item to sell, you're out the $100 it would've brought in as income.
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 02, 2014, 05:13:22 PM
I'd write of the FMV of the cart because you've changed the item.  Raw goods to usable item.

I repair copper cookware.  If I was to donate one its no longer the the same item.  I've improved it. I've put time and labor and money into it......I'd right of new FMV, not cost of pan.



And no.  You can't get away with it as a gambling loss because it's not a game of chance.  Your guaranteed to get what your looking at.   Like you can't write of betting on a pool.  It's considered a game of skill, not chance.  Nice try though.    ;D
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on January 03, 2014, 10:05:22 AM
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV? Seems to me, that would be the most logical..
Title: Re: The Tax Man Cometh
Post by: alloro on January 03, 2014, 10:15:01 AM
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV?

Yes you would.
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 03, 2014, 06:42:52 PM
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV? Seems to me, that would be the most logical..

If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it OR its basis (http://www.irs.gov/pub/irs-pdf/p551.pdf) . The basis of contributed inventory is any cost incur­ red for the inventory in an earlier year that you would otherwise include in your opening inven­ tory for the year of the contribution. You must remove the amount of your charitable contribu­ tion deduction from your opening inventory. It is not part of the cost of goods sold.
If the cost of donated inventory is not inclu­ ded in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Treat the inventory's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.


http://www.irs.gov/pub/irs-pdf/p526.pdf




The way I read the law, and I'm not a tax lawyer or CPA, I'd say no.
I can't go to the east coast and buy a 100 Amish chairs that are common there for $1/ea, bring them here where they sell for $10  then donate them and say there is $1000 donation.  Take $150 (15% bracket) off my taxes.    The government isn't there to buy your sh*t that doesn't sell....

Here is some related info......because a lot of it comes down to how much you donate:
http://www.hrblock.com/free-tax-tips-calculators/tax-help-articles/Estates,-Trusts,-and-Gifts/Charitable-Donations.html?action=ga&aid=27166&out=vm
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 03, 2014, 07:18:24 PM
My head hurts.
Reading IRS tax codes is like putting together a giant jigsaw puzzle that forms a riddle that gives you a clue on where to find the next jigsaw puzzle......
Title: Re: The Tax Man Cometh
Post by: alloro on January 04, 2014, 10:52:24 AM
The government isn't there to buy your sh*t that doesn't sell....

They're not buying it, they are only allowing the tax deduction on it. Meaning that if a $100 item is donated you take $100 off your income, you do not take $100 off your tax bill. If your overall taxes are about 15% then the government is giving up $15 not $100.
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 05, 2014, 01:19:44 PM
They're not buying it, they are only allowing the tax deduction on it. Meaning that if a $100 item is donated you take $100 off your income, you do not take $100 off your tax bill. If your overall taxes are about 15% then the government is giving up $15 not $100.

You are correct.  But have you ever been tested for reading comprehension?

Look at my example.  You missed a major point.

But let's use your example......

$100 item.
Donate.
Write off $100.
Get $15 off owed taxes.  (Assuming 15% tax bracket)

But what did you pay for item?

Say you picked it at garage sale for $10.  You write off $10, not the  FMV of $100.  If so, you'd get $15 off tax bill.  Annnnd.....government is buying your sh*t.  You made $5 profit.

Put this over to storage unit.
If you paid $100 for unit and that was the only thing in it, cool.
But if you paid $100 for unit.  Ten items in unit.  Each item can only have a combined donation value of $100.    You can't say the FMV of ten items combined is $1000, write off donation value of $1000 and get $150 off your tax bill when you only paid $100 for the items.



Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on January 05, 2014, 04:38:18 PM
...Or you can get yourself a Tax ID and FEIN number, both free.. Donate all you want and claim everything as FMV and list  as "business inventory". Your business can be selling on eBay, yard saling, flea marketing, or an actual storefront. No?
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 05, 2014, 05:29:00 PM
I've been reading and It seems you can......but it has to be in inventory for an amount of time.
I don't think you can just clean out unit, put good stuff in store, take stuff your store doesn't sell to donation site and right of FMV.

I haven't got all the way thru the codes.  I'm confused because one says one thing and another seems to contradict it........
Title: Re: The Tax Man Cometh
Post by: HomeGrownPromos on January 05, 2014, 07:50:53 PM
I've been reading and It seems you can......but it has to be in inventory for an amount of time.
I don't think you can just clean out unit, put good stuff in store, take stuff your store doesn't sell to donation site and right of FMV.

I haven't got all the way thru the codes.  I'm confused because one says one thing and another seems to contradict it........


Contradiction is what the IRS does best.. I believe that there is no rule stating how long a business has to keep inventory before it can be donated. For items like clothes, I just send it straight to another thrift store if it comes in and I can't, or won't sell it. I get enough clothing in each locker to cycle through, or "cover" the deduction. Another advantage to starting a "business" is that you get 100% FMV as a sole proprietor rather than 15%..
Title: Re: The Tax Man Cometh
Post by: alloro on January 05, 2014, 09:28:14 PM
You are correct.  But have you ever been tested for reading comprehension?

I comprehend just fine and at least I don't contradict myself in the same line like you did up there. If I'm correct, then I must've comprehended just fine.

But to further the point you're trying to incorrectly make... for items valued at $500 or less it doesn't matter what you paid for the item. It's FMV is $100 and when you donate it you're out the $100 because you no longer have the item to sell. So you are now out the $100 of income it would've brought you when you sold it. If the government were buying the item they would have to pay $100, not the $10 I paid for it.

You seem to have difficulty discerning the difference between the FMV and the cost of an item. Deductions are figured on the FMV, not your cost.
Title: Re: The Tax Man Cometh
Post by: rulesforrebels on January 06, 2014, 11:01:46 AM
i have to pay taxes quarterly so can't really wait  until the end of the year. this last part of the year was good but bad for taxes. i think we gonna owe about 30k. have the money set aside and fortunately paypal reserves are starting to be released so i can at least pay my taxes. paypal does seem pretty cool though, my rep said if i couldn't pay my taxes give a call and they could release some money prematurely so i could do so
Title: Re: The Tax Man Cometh
Post by: Alias300 on January 06, 2014, 11:34:35 AM
I comprehend just fine and at least I don't contradict myself in the same line like you did up there. If I'm correct, then I must've comprehended just fine.


You were correct in your math example but missed the whole point of my previous post....as in you didn't comprehend it.....whatever.   Your a smart guy from what I see in your post.  Just seem to be a bit stubborn.   If I'm wrong, prove it.   I said from the get go I'm not a professional and could be wrong, just they way I'm reading it....

Anyway, this is what I was emailed from Itsdeductible.

What is fair market value?

The IRS defines fair market value as the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act and both having reasonable knowledge of the relevant facts.

IRS Publication 561
Factors that affect the fair market value of an item include: condition, style, use, and age. ItsDeductible considers these factors together as contributing to an item's value.

**You also need to consider the length of time you have owned an item.**

Items Owned
Deduction Can Be
Less than one year   No more than the original price paid
More than one year   Generally at the fair market value
(Consult IRS publication 526 for certain exceptions.)





Examples of appropriate ways to value item donations:

You donated a pair of men's blue jeans that are in style and in excellent condition. ItsDeductible valued them at $10. However, just six months ago, you paid only $7 for these blue jeans because you bought them on sale. The most you can deduct is $7.

You have a Toastmaster coffee maker that's only six months old, but it is out of style and has significant defects. You should select the "low" value category. Because of recent tax law changes, items in this category are not deductible. Learn more

You find a designer-label leather purse of high value at a garage sale and you buy it for only $20. Fifteen months later, you donate this purse to a charity. Since you only used it a few times, it still looks the same as the day you bought it at the garage sale. You can value this item as "high" in ItsDeductible.
Examples of Improper Valuing

You donate a woman's coat of high value that you originally bought for $55. In ItsDeductible, you describe it as a women's designer coat, which has a value of $165. If this coat is not a designer coat and you only paid $55 for it to begin with, it is your responsibility to assign the proper description and value.

You donate a belt sander that you've only had a few months, but it is broken. Since the sander is broken, you must describe it as "poor" quality even though it is practically new. Broken items that cannot easily be fixed will usually have little or no value. Because of recent tax law changes, items in this category are not deductible. Learn more

You buy a man's suit at a garage sale for $5. One month later, you donate that suit to your local Salvation Army. The suit is in style and made of high quality material, so you select the "high" value in ItsDeductible. ***Since you have owned this property for less than one year, you are responsible to make sure you deduct only what you paid for it, instead of using the fair market value listed in ItsDeductible which may be higher.****
................………………………

So that's where my confusion was.    I couldn't figure out why some parts of code say FMV and other parts say cost.   So maybe I'm reading this wrong too but my above post is correct.   You can't just go buy a bunch of inventory on the cheap and then donate it at FMV.  You need to hold it in inventory for a year.